A follow-up video from conservative activists targeting NPR shows that its former CEO and its top lawyer were aware of a potential $5 million contribution from a phony Muslim group.

NPR has said the group did not meet its standards for potential donors and that it never came close to accepting the donation.

The video includes recorded phone conversations between NPR executive Betsy Liley and an activist posing as a wealthy donor from a nonprofit with ties to the fundamentalist Muslim Brotherhood. They discuss the logistics of such a donation and the circumstances under which the gift could be kept anonymous.

A previous video featured a former NPR executive calling the tea party racist. That video led to the resignation of NPR president and CEO Vivian Schiller.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

WASHINGTON (AP) - NPR will forge ahead in the fight for federal money despite six months of bad PR - and without its chief executive.

NPR's president and CEO resigned Wednesday to limit the damage from hidden camera footage of a fellow executive deriding the tea party movement as "seriously racist." Conservatives called the video proof that the network is biased and undeserving of federal funds.

From the news organization's perspective, the timing was exceptionally bad. The battle for funds will be the toughest yet, with Republicans in the new House majority looking to cut all federal funding of public radio and television.

It's the latest blunder for the news organization, which publicly admitted fumbling the firing of analyst Juan Williams over comments he made about Muslims. Then NPR had to apologize to the family of Rep. Gabrielle Giffords when it falsely reported the congresswoman's death.

Vivian Schiller said staying on as chief executive would only hurt the looming battle over funding, which public broadcasting officials claims would force some stations to fold.

"We took a reputational hit around the Juan Williams incident, and this was another blow to NPR's reputation. There's no question," she told The Associated Press.

Her interim replacement, NPR general counsel Joyce Slocum, told The Associated Press on Thursday that NPR remains a strong organization and that the week's controversy had not affected its ability to deliver news and information. She also defended NPR's vetting process for potential donors. People who think the organization is biased would change their minds if they listened to its programming, she said.

The video showed two conservative activists posing as members of a fake Muslim group at a lunch meeting with NPR's top fundraiser, Ron Schiller, who is not related to Vivian Schiller and who also resigned. The men offered NPR a $5 million donation and engaged in a wide-ranging discussion about tea party Republicans, pro-Israel bias in the media and anti-intellectualism.

"The current Republican Party is not really the Republican Party. It's been hijacked by this group that is ... not just Islamophobic but, really, xenophobic," Ron Schiller said in the video, referring to the tea party movement. "They believe in sort of white, middle America, gun-toting - it's scary. They're seriously racist, racist people."

He also said NPR "would be better off in the long run without federal funding," a statement most Republicans agree with.

Last month, when the House voted to eliminate funding for the Corporation for Public Broadcasting, which provides money to public radio and television stations, no Republicans stepped forward to defend it. Sen. Jim DeMint, a South Carolina Republican, introduced similar legislation in the Senate last week.

Similar efforts to strip funding from public broadcasting in 2005 and in the 1990s were unsuccessful, but DeMint's spokesman Wesley Denton said, "I don't expect the vote to be the same as it has in the past."

Rep. Earl Blumenauer, a Democrat from Oregon, said this is the first time he hasn't been able to get interest from any Republicans to co-chair the Public Broadcasting Caucus that he founded a decade ago.

Rep. Michael McCaul of Texas, the Republican co-chair of the caucus last year, said he would leave it entirely because "NPR has crossed the line to political bias."

Cutting funding for CPB will meet fierce resistance in the Democratic-controlled Senate, however, and President Barack Obama favors continued support. White House spokesman Jay Carney noted that both Democratic and Republican presidents have supported such funding in the past.

The CPB is receiving $430 million in the current fiscal year and will get $445 million in fiscal 2012. CPB handed out nearly $94 million in grants to more than 400 public radio stations - not all of which are NPR affiliates - in fiscal 2010.

NPR itself typically gets only about 2 percent of its budget from CPB grants, but many of its 268 member stations rely heavily on them. NPR affiliates get an average of 10 percent of their funding from CPB, and some small and rural stations get more than 40 percent of their funding that way, although NPR could not provide exact figures.

A cut in funding to CPB would hit public television stations harder than radio stations. By law, 75 percent of CPB's grant money must go to TV stations.

NPR board chairman Dave Edwards said NPR would make a strong case about the importance of federal funding.

"It is absolutely true that without federal funding, a lot of our public radio and public TV stations in the system could go dark, and that will happen in some of the smallest communities we serve," Edwards said. "In some cases, public broadcasting remains that community's primary connection with the outside world."

Howard Liberman, a longtime broadcast communications attorney who represents NPR affiliates, said many stations were unhappy with Vivian Schiller and the release of the video was the final straw. He pointed to the Williams controversy and other moves by Schiller that have alienated stations, such as shortening the organization's name from National Public Radio to NPR and trying to drive listeners toward NPR's website.

"This was just the last in a series of things that have shown to the members and the stations that this ship is not running very well," Liberman said.

It's not clear how the latest setback will affect fundraising, but when Williams was fired after he said on Fox News that he felt uncomfortable when he sees people in "Muslim garb" on airplanes, a number of major stations said they were meeting or surpassing their fundraising goals. Vivian Schiller took heat for Williams' departure, in part because she sacked him over the phone.

NPR listeners interviewed by the AP were divided over whether the video was a sign of problems within the network.

"They are obviously biased," said Frank Stefano of Erie, Pa., a 46-year-old facilities administrator who says he will stop supporting public radio unless changes are made. "They need to come out with a plan that says, 'Look, here's what we're going to do to fix this.'"

Linda Feltz Crews, a retired human resources director from Orange Park, Fla., said in e-mail that the dust-up actually makes her more likely to contribute to public broadcasting. "There's been lots of great reporting by NPR and I would hate for this mess to permanently affect their ability to continue operating," she said in a Facebook posting.

Robert D. Charter, 49, a payroll administrator from Dallas, said it was probably better that Vivian Schiller resigned, but he fears for the future of public broadcasting.

"I'm afraid in this politically charged environment that there are people out there in Washington who would do anything to harm a venue that is enjoyed and probably even cherished by a lot of Americans," he said.

The video of Ron Schiller was posted by conservative activist James O'Keefe on his Project Veritas website. O'Keefe is best known for wearing a pimp costume in hidden-camera videos that embarrassed the community-organizing group ACORN. He also made headlines when he pleaded guilty to a misdemeanor last May after he was accused of trying to tamper with the phones in Sen. Mary Landrieu's office in New Orleans. O'Keefe didn't return a request for comment.

NPR said it was appalled by Ron Schiller's comments. He was president of its fundraising arm and a senior vice president for development, and was not involved in NPR's reporting.

"While the meeting I participated in turned out to be a ruse," Ron Schiller said, "I made statements during the course of the meeting that are counter to NPR's values and also not reflective of my own beliefs. I offer my sincere apology to those I offended."

PBS spokeswoman Anne Bentley said the TV network also was contacted by the same fake Muslim group that met with Ron Schiller, but halted discussions after it was unable to confirm the organization's credentials.

Ron Schiller resigned immediately after the video emerged, but he had told NPR before it was made that he planned to leave to become director of the Aspen Institute Arts Program. The Aspen Institute confirmed Wednesday that he would not be taking the job, in light of the controversy.

Another NPR executive, Betsy Liley, was at the lunch with Ron Schiller. She said little, although she can be heard laughing when one of the men says his group referred to NPR as "National Palestinian Radio." She has been placed on administrative leave.

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AP Television Writer David Bauder in New York, Darlene Superville and Ben Evans in Washington and David Dishneau in Hagerstown, Md., contributed to this report.